This bill amends RCW 82.04.405 by adding a new subsection that removes the business and occupation (B&O) tax exemption for Washington-chartered credit unions when they merge with or acquire a bank regulated by the Washington State Department of Financial Institutions (DFI). Beginning October 1, 2025, a state-chartered credit union that undergoes such a merger or acquisition is subject to a B&O tax equal to its gross income multiplied by 1.2 percent. The change modifies existing tax law rather than creating a new crime or changing criminal penalties; it is a substantive tax liability change targeted to a specific transaction trigger. The existing general exemption for credit unions organized under state, other state, or federal law is retained except for the new carve-out that applies only to credit unions organized under Washington law that merge with or acquire a DFI-regulated bank. The extracted text does not specify whether the tax applies only to gross income earned after the merger/acquisition or also to prior periods, does not include definitions of "gross income" for this purpose, and does not set out administrative, reporting, or enforcement procedures. Those details or any fiscal notes are not included in the provided facts.

If enacted, any Washington-chartered credit union that merges with or acquires a bank regulated by the state Department of Financial Institutions on or after October 1, 2025 will no longer be exempt from the state business and occupation tax and will face a new ongoing tax cost equal to 1.2 percent of its gross income. Practically, affected credit unions will see higher operating costs and reduced net margins, will need to allocate resources to tax reporting and payment, and may revise financial projections or deal terms for mergers and acquisitions; the state is likely to collect new revenue from those institutions while the Department of Revenue would handle administration and collection. The parties most directly affected are Washington-chartered credit unions considering or completing mergers/acquisitions with DFI-regulated banks, and the banks involved because the change can alter transaction incentives; smaller credit unions contemplating growth through acquisition may find deals less attractive. Important implementation details are missing from the provided text—most notably whether the tax applies only to income earned after the transaction or also to prior periods and how “gross income” will be measured for this purpose—so credit unions and state agencies will need clarifying rules or guidance before full budgeting and compliance planning.